Commenting on its revisions to government borrowing, the Office for Budget Responsibility said: "The economy has slightly more momentum in the near term, thanks to the unexpected strength of the world economy, but there seems little reason to change our view of its medium-term growth potential.

"And while the budget deficit looks likely to come in almost £5bn lower this year than we expected in November, the explanations for this imply smaller downward revisions for future years. As a result, the Government’s headroom against its fiscal targets is virtually unchanged."

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The Office for Budget Responsibility describes a recent improvement in productivity growth as the “biggest surprise” in its March forecast.

The UK saw the strongest two quarters of productivity growth since the financial crisis at the end of last year.

If sustained, it would lead to stronger medium term growth, and stronger pay rises.

While average earnings are set to be slightly stronger in the near term than the OBR forecast in November, the watchdog actually nudged down its forecasts for growth in 2021 and 2022.

This is because the economic watchdog does not expect the improvement in productivity to last - and it points to what happened in 2011 as evidence.

It says the recent improvement “reflects a much weaker path for average hours worked, rather than stronger output or weaker employment growth”. It says the fall in average hours worked “is the largest since mid-2011”.

It adds: “In 2011 the fall in hours and associated pick-up in productivity growth proved to be erratic and were soon reversed. We assume for now that the same will be true on this occasion.”

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In its report, the Office for Budget Responsibility said: "One area where sufficient clarity is now available to be more specific relates to the financial settlement – the ‘divorce bill’ – that the UK will pay after leaving the EU on 29 March 2019.

"The December 2017 joint report by the UK and EU negotiators detailed the components of this settlement. The Treasury estimated at the time that it would amount to £35bn to £39bn.

"Using assumptions consistent with our central economic and fiscal forecasts, we estimate the settlement would cost £37.1bn, with around 75% falling due within our five-year forecast period."

John McDonnell accused Philip Hammond of 'complacency'.

He said: "Hasn’t he listened to the doctors and nurses, the teachers, the police officers, the carers and even his own councillors?

"They are telling him they can’t wait for the next Budget. They’re telling him to act now.

"For eight years they’ve been ignored by this government. And today – they’ve been ignored again."

Read his full response here, external

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Looking at his scope for spending, Mr Hammond said: "If, in the autumn, the public finances continue to reflect the improvements that today's report hints at, then ... I would have capacity to enable further increases in public spending and investment in the years ahead, while continuing to drive value for money to ensure that not a single penny of precious taxpayers' money is wasted."

However, Hetal Mehta, senior European economist at Legal & General Investment Management, said: "We don’t expect Hammond to go on a spending splurge in the Autumn Budget.

"He will likely save the extra room for manoeuvre ahead of the next election and to cushion any downside risks emerging from the UK’s departure from the EU.”

As the chancellor revealed in his speech, the OBR has increased its forecast for growth in 2018 - although the outlook for 2021 and 2022 has been downgraded.

Here are those figures again:

Image source, OBR

The Chancellor has got a thumbs up from the Federation of Small Businesses.

Chairman Mike Cherry said:

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Mr Hammond didn't give much away on plans to tax the revenue of major technology giants operating in the UK.

He said: "In the autumn, we published a paper on taxing large digital businesses in the global economy and today we follow up with a publication that explores potential solutions."

We were never all in this together, as they claimed," Mr McDonnell adds.

He mentions "the indefensible spectacle of a chancellor congratulating himself on marginally improving economic figures".

He says the Government is setting up the country to fail.

"This crisis could turn into a catastrophe," says McDonnell. He reminds MPs of the homeless person who died just outside the House of Commons recently.

He asks the chancellor to listen to local Conservative councillors about the problems around the country.

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On the litter levy, the Chancellor said "disposable plastics like coffee cups, plastic cutlery and foam trays damage our environment".

He said that the government is determined to take action and is seeking views on the best way to change the tax system to encourage the responsible use of plastic.

Money raised from any tax changes would be used to encourage the creation of new, greener products and services, he said.

In addition, £20m from existing budgets will be given to businesses and universities to research ways to reduce the impact of plastics on the environment.

McDonnell says: "I'm asking the Chancellor and I'm asking every Conservative MP if they're serious about ending austerity to vote with us this afternoon to give children the free school means they're entitled to."

Shadow Chancellor John McDonnell asks:

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Shadow Labour Chancellor John McDonnell pleads with "the Tory bully boys" to let him speak.

"They can make their snide remarks but people out there know the truth of how hard it is in this economy," he says.